Difference Between Fx Rates And Interest Rates – Inflation and Interest Rates For Forex Traders
Understanding the relationship between inflation and interest rates for a particular currency can help you decide whether or not that currency is growing stronger or weaker, and whether you should be buying or selling that currency. Inflation tends to be a constant factor in today’s monetary system, and typically inflation is an indication of economic strength and an expanding economy.
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As employment levels and wages rise, people have more money to spend and prices will tend to rise as a result of the increase in the money supply. This is the basic cause of inflation, and while inflation levels that are kept in check can lead to sustainable economic growth, unchecked inflation levels can spell economic disaster as the economy can literally collapse under its own weight leaving hard-working citizens with money that has had its value and buying power eroded. Understandably, the Federal Reserve and all other central banks will monitor inflation levels very closely, and one of the best ways to combat inflation levels is by raising interest rates.
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When interest rates are low, you may not be earning as much money on your savings but it is much easier to borrow money for a house, car, business, or any other type of credit. It is this ease of access to new money that can contribute to the cycle of inflation. However there can come a time when inflation levels are rising too far too fast, and instead of creating economic growth in a sustainable fashion it can lead to an out of control economy in overdrive that can lead to something that Alan Greenspan called “confiscation by inflation,” meaning that the value of each person’s money is eroded by the large increases in the overall money supply.
Understanding the relationship between inflation and interest rates for a particular currency can help you decide whether or not that currency is growing stronger or weaker, and whether you should be buying or selling that currency. Inflation tends to be a constant factor in today’s monetary system, and typically inflation is an indication of economic strength and an expanding economy.
..
As employment levels and wages rise, people have more money to spend and prices will tend to rise as a result of the increase in the money supply. This is the basic cause of inflation, and while inflation levels that are kept in check can lead to sustainable economic growth, unchecked inflation levels can spell economic disaster as the economy can literally collapse under its own weight leaving hard-working citizens with money that has had its value and buying power eroded. Understandably, the Federal Reserve and all other central banks will monitor inflation levels very closely, and one of the best ways to combat inflation levels is by raising interest rates.
..
When interest rates are low, you may not be earning as much money on your savings but it is much easier to borrow money for a house, car, business, or any other type of credit. It is this ease of access to new money that can contribute to the cycle of inflation. However there can come a time when inflation levels are rising too far too fast, and instead of creating economic growth in a sustainable fashion it can lead to an out of control economy in overdrive that can lead to something that Alan Greenspan called “confiscation by inflation,” meaning that the value of each person’s money is eroded by the large increases in the overall money supply.
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Raising interest rates will keep inflation in check by tightening the credit markets and making more difficult to gain access to new money, thereby shrinking the growth of the monetary supply and making harder to gain access to loans. The relationship between interest rates and inflation levels is an important one to understand if you are a forex trader, because keeping tabs on these simple metrics can help you determine where the overall trend of the currency is and whether you should be buying or selling. A lower interest rate will mean that your money does not grow as quickly as a factor of time, but it can also mean that the country is experiencing economic growth as loans and credit are more easily available, which means the value of a currency can increase in the foreign exchange markets despite the higher inflation levels.
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However, inflation does not always indicate economic growth. There have been historical instances of inflation coupled with increasing unemployment and decreasing wages, and this type of economic condition is called stagflation. Stagflation can be crippling to a country’s economy and is a central bank’s worst nightmare in terms of figuring out how to solve this problem. Back in the 1970s when the United States first abandoned the Gold Standard under President Nixon, there was rampant stagflation that had to be countermanded with extremely high interest rates that went as high as 20%. This is an example of what can happen when inflation levels are left to run wild, and it can leave you with more money but far less buying power.
..
However, inflation does not always indicate economic growth. There have been historical instances of inflation coupled with increasing unemployment and decreasing wages, and this type of economic condition is called stagflation. Stagflation can be crippling to a country’s economy and is a central bank’s worst nightmare in terms of figuring out how to solve this problem. Back in the 1970s when the United States first abandoned the Gold Standard under President Nixon, there was rampant stagflation that had to be countermanded with extremely high interest rates that went as high as 20%. This is an example of what can happen when inflation levels are left to run wild, and it can leave you with more money but far less buying power.
Assalammualaikum wbt. Saya Maryuni Miskon, kakak kpd Hairuman amat-amat mengharapkan bantuan yang berterusan untuk menampung hidup dan menampung kos perbelanjaan perubatan hairuman. Bantuan telah terhenti sedangkan ubatan masih lagi diperlukan untuk menyembuhkan kesakitannya. Apatah lagi untuk merancang perjalanan kehidupan hairuman yang masih jauh. Hairuman OKU seumur hidup. Sekarang ini dia menjadi pesakit luar di hospital. Keadaan kulit yang melecur blm lagi sembuh, masih pedih, berair dan gatal. Manakala 3 kerat anggotanya telah dipotong, yang tinggal hanyalah 1 kerat iaitu kaki kanan, tetapi masih dalam pemulihan, tidak boleh digunakan untuk berdiri apatah lagi berjalan, kerana kelecuran yang teruk menyebabkan banyak saraf kaki yang rosak. Ini menyukarkan dia untuk menguruskan dirinya sendiri apatah lagi membuat aktiviti, terpaksa mengharapkan bantuan untuk bergerak. Harapan saya dapatlah kalian terus menyebarkan berita tentang hairuman kerana ramai juga yang tidak tahu tentang kisahnya bila berselisih dengan hairuman di tempat awam. Ada juga org awam yang prejudis dan seakan mengejek2 tanpa tahu apa sebenarnya dia jadi begitu. Harap ada insan-insan yang mulia sudi menghulurkan bantuan untuk menampung kos perubatannya. Tak tertanggung rasanya dengan derita dan kesedihan yang melanda. T.kasih atas sumbangan kalian semua. Semoga Allah mencucuri rahmat ke atas kita semua. Amin….
Untuk sebarang sumbangan bolehlah disalurkan ke :
MARYUNI BT MISKON
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atau
MUHAMAD HAIRUMAN B. MISKON
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A set of analyses that a forex day trader uses to determine whether to buy or sell a currency pair at any given time. Forex trading strategies can be based on technical analysis charting tools or fundamental, news-based events. The day trader's currency trading strategy is usually made up of a multitude of signals, which trigger buy or sell decisions. Forex trading strategies are available for free, for a fee or are developed by the traders themselves.